Effects of Selected Macroeconomic Variables on Stock Market Returns in Nigeria
Adeleke Gabriel Aremo *
Department of Economics, Obafemi Awolowo University, Ile-Ife, Osun State, Nigeria.
Olabode Eric Olabisi
Department of Economics, Faculty of Humanities, Social and Management Sciences, Elizade University, Ilara-Mokin, Ondo State, Nigeria.
Oyinlola O. Adeboye
Department of Economics, Obafemi Awolowo University, Ile-Ife, Osun State, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
The paper empirically examines the effects of selected macroeconomic variables on stock market returns in Nigeria within the period 1985 and 2014 with a view to determining the macro-factors determining stock market returns in Nigeria. The Autoregressive Distributed Lag (ARDL) approach was employed to examine both the short and long-run effects of selected macroeconomic variables on stock market returns using annual time series data spanning 1985 to 2014. The findings show that both foreign direct investment inflows and external debt do not have significant impact on stock market returns in Nigeria while money supply and trade openness have significant positive effect on stock market returns in the long-run. The annual speed of adjustment towards equilibrium is 91 per cent. The causality results show two-way causality between the nominal stock market returns and foreign direct investment inflows, while one-way causality runs from nominal stock market returns to trade openness.
Keywords: Macroeconomic variables, stock market returns, autoregressive distributed lag bounds testing approach, Zivot and Andrew unit root test, multivariate causality test.